The Power of the U.Plan Prepaid Tuition Program

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Julie Shields-Rutyna: All right. Good evening. Welcome, everyone. My name is Julie Shields Rutina, and I'm the Director of College Planning, Education, and Training at MIFA, and I'd like to welcome you to this webinar tonight called The Power of the U Plan, and we're going to talk about MIFA's U Plan prepaid tuition program. All right, let me give you a few logistics.

I have some slides. I'll share some information, and then please, if you have questions, just type them into the Q& A section on your screen, and we will get to all of those questions and answer them, and I'm happy to do that. I love it to be a good conversation. Also, if you need closed captioning, You can click the CC button, Live Transcript, and you'll be able to see the words that I'm speaking.

If you need to leave, feel free to do so. Tomorrow I will be sending the recording. I'm recording this webinar. I'll send the recording and I'll send the slides to you. You can also have those to share with others that you think might be

I'll say a few words about MIFA. MIFA has been around since 1982, and we were created with the mission of helping families plan, save, and pay for college, and we do the same thing today. So, MIFA has the state's savings programs. Uh, we have the, the Youth Fund 529 plan, college savings plan. We have the U Plan, prepaid tuition plan, and that's what we're going to talk about this evening.

And we also have the Attainable Plan, which is an ABLE program. So that allows, um, individuals with disabilities to save for not just college expenses, but a wide variety of life expenses. So that's another plan. We also have low cost loans for college, private loans for families who need that type of financing.

And we have a huge outreach program where we have all kinds of free information, resources, um, guiding families about planning, saving and paying for college. So wherever you are in the college process, wherever your student is, um, we have something For you. All right. So tonight we're going to really talk about the U plan, which is a very unique program, and we'll talk about the benefits of the U plan.

We'll talk about the network of colleges and universities that make up the U plan. And we'll talk about the U plan and financial aid and really how college savings is treated in the financial aid process, because that's always a very important question that families have. And we'll talk about how you enroll and how you can manage your, your account on, online, and then we'll address any further questions that you have.

Alright, so here's, here are the basics of the U Plan. So the U Plan, as I mentioned, is a prepaid tuition program. So essentially what you're doing is you're purchasing a percentage of tuition today. And then you lock in that percentage and then your savings becomes that percentage of tuition at the time that your student is ready to go to college.

Okay, so I'll try to explain it. I'll give a few examples because I think that's sometimes the best way to do it. But I'll also say you can save in your U Plan account all year long. And then what happens to that is you save all year long, and on July 15th each year, your savings from the previous 12 months, um, will go to lock in 100 percent of the tuition and mandatory fees at today's rates.

Um, so, we'll talk about what that means through my examples. But you can lock in the rates at over 70 public and private institutions here in Massachusetts, and I'll show you the list. It's a very varied list covers a lot of the colleges in Massachusetts, if not most. And, uh, but we'll talk about what happens if your student attends a different college in a different state or something like that.

So your savings that you're purchasing, these tuition certificates, are really interests in the Commonwealth's general obligation bonds. So that's what you're purchasing. You do need to have saved 300 in that prior year to be able to have the money go and purchase a certificate. That usually happens.

There's no maximum limit of how much you can save and no Massachusetts residency. required. All right. So let me try to explain it a few different ways so you can really see how it works. Um, well, and I'll tell you some benefits of it of it as well. Um, your money in the U plan grows federal and state tax free Massachusetts state tax free.

So that's a huge benefit. And additionally, um, by saving in the U plan, you can claim the Massachusetts state income tax deduction of up to 1, 000 for a single person and 2, 000 if you are married filing jointly. So you have both federal and mass tax free. Um, you know, the state income tax earnings and the state income tax deduction and then any unused money in the account.

Let's say, you know, there's this money left over. Um, you can always withdraw that money and it's returned to you with interest that has accrued at the C. P. I. Consumer price index level. And a lot of times families ask, do I have to select a college up front and the answer is no. You don't select a college up front.

You're buying these tuition certificates that are going to be a percentage of tuition at a variety of colleges, and every year you'll receive a report, which shows how much your money is worth. At all of those 70 colleges. So, let me try to give an example. Alright, so let's say, um, you have three colleges here.

College A, B, and C. And let's say that current tuition and fees in the colleges are 5, 000, 10, 000, and 25, 000, respectively. Okay? And that's just tuition and fees. That's important to know. It's not You know, housing and food and all of those things, just tuition and fees. And let's say your initial investment into the program is 1, 000 to put in the program.

So you put that in. Well, right away, your 1, 000 is worth 20 percent at College A, which costs 5, 000. It's worth 10 percent at College B. It's worth 4 percent at College C, who has a tuition and fees of 25, 000. So right away, your initial investment is worth a different percentage at the different institutions, depending on how much their tuition and fees are.

But you would receive a report each year telling you, here are all the colleges in the program, here's how much money you put in, and here's the percentage you have locked in. Okay, so let me give an example. Let's say, let's take this. This, uh, well, yeah, let's take this 10, 000 college. So today there's a college that has tuition fees of 10, 000.

You put in 1000. And that's worth 10%. So then let's say by the time your child is going to college, college B costs 20, 000. Okay, well, then, Okay, well, then, Your thousand dollars, which was worth 10% of 10,000 will be worth,

let me, let me say this. I'm sorry. I'm saying it wrong. . Um, yeah, sorry. So it's worth 10% if it's $10,000 and the thousand is worth. Let me do this math. I'm sorry. I have a hard time presenting and doing the math together. You've probably already done it for me. Um,

sorry. We're going to say, what did we say, that tuition is going to be 20, 000. Yeah, so your 1, 000 is 2, 000. That's easy math, but again, hard to do two things at once. So your money has doubled, um, by the time your child is going, going to college. Um, so that's, that's how that works. And, um, again, it's locking in just the tuition and fee.

All right. Here are all the colleges, um, that participate in this program. Okay, so you can see, um, there are, at the beginning, you see American International, Private College in Springfield, there's Amherst College and Amherst Mass, and then we look a little further down, there's Worcester State University, so a lot of the state colleges and universities, some community colleges, private colleges, some very high colleges, Um, and then there's a lot of priced private colleges there as well.

So these are all the colleges that participate and that guarantee to, um, that your money will be treated exactly as intended. So this is some, a question we get a lot. Let's say a college or university joins the U plan going forward. They must honor all of the tuition certificates. Purchased since the program started in 1995.

And let's say a college drops out of the U plan. Um, these things really haven't happened. Um, but it must honor all of the tuition certificates purchased prior to the year withdrew from the program. So that's how that, that works. And before I get into that, let me, let me say a word about, let's say Your student doesn't attend one of the participating colleges.

Well, that's okay. You won't be able to lock in that percentage and receive that percentage back. But you can you can withdraw your money. And you can withdraw the money you put in plus CPI interest that has accrued over the years and take that money and then use it to pay for another college or something else.

Um, another, you know, career college option for, um, your student. So, for example, I have two children and I had a U plan and My children went to college in Pennsylvania and New Hampshire, so I had to withdraw my money, but then I was able to use that money and pay college expenses. All right, so you plan and financial aid.

Um, people really worry. That Oh, if I save for college, sometimes is that going to hurt me in the financial aid process? Will I not receive financial aid? So it's really important to know that any money that you save, um, as a parent, a parent asset is treated very leniently in the financial aid process.

process. And so when applying for financial aid, the U plan is considered a parent asset because you own it and the child is the beneficiary. The student is the beneficiary and the financial aid formula, um, will treat that at a maximum of 5. 6%. So if you have 10, 000 in the You plan the college will assume that you have about 560 of that to spend each year now.

You're going to probably spend more of it. You're going to spend your you plan. But as far as treating it for your eligibility for financial aid, it's treated at that very lenient number families who have college savings of 100, 000 that only influences their financial aid eligibility by 5600. per year.

So it's, it's really great to save for college to be able to pay those expenses and it really hurts you very little in the financial aid process, if at all. So, um, that's a really important thing to know. Lauren, and here is how you would enroll. You would go to this page on the MEFA website with the U plan and you can start saving right away.

Put in your first name, last name, email, click start saving and that's at MIFA. org slash uPlan. And then you'll move along and it will have you set up a uPlan account. You can create a password, put your email address in there. It's very relatively easy, I would say. And so you provide account owner information.

That's you, you designate the beneficiary, which is the student. And if you want, this is optional, but you can designate a successor account owner who would be maybe, you know, an aunt or an uncle, your, your, your sister, brother, um, other parents, those things just, um. In case something happened, you would want a successor owner.

And then what you do is you select your maturity years. And that means you're selecting the years that you anticipate that the student will be in college. And That way the money grows toward those years, and then you make a one time savings deposit, or you can set up automatic savings and have money come out of a bank account or paycheck, something like that.

And. Set that up and we talked about this a little. The maturity years are one or more of the years that you expect your child to attend college. So, you know, freshman, sophomore, junior and senior year. Of course, we know with kids, things change, plans change. Some child might take a gap year. Um, but if you're in right in the ballpark of probably the years, um, that your student will attend college, that the closer that you are to those exact years, the more exact this calculation of tuition percentage will be.

So it's also easy, as we mentioned, to enter your bank account information and either make a one time contribution or Get on a schedule for automatic deposits and that can make saving in the U plan even easier.

You can manage your account online Again, it's it's very it's set up to be easy for you to work with you can add to your savings You can review your statements Check your balance. You can request a disbursement when when that time comes you can open an account for another beneficiary And always change your contact information.

So, first step, go to MIFA. org slash UPLAN, um, know, as I mentioned, you will receive quarterly statements that will detail your contributions and also an annual statement where you'll be able to see what percentage you have locked in at all of the different participating institutions. Something else that's important is if you sign up for MIFA emails, which you can do right on the front page of the MIFA.

org website. Um, MIFA sends out monthly emails to you that are very much targeted to the age and stage that your student is in in this college process. So when your student is really young, these emails are a lot about savings. As your student gets older, we talk about all of the resources we have, um, such as our MIFA pathway portal that your student can, can use to, uh, learn about themselves, discover careers, um, and as they get closer to the future.

college process. They can, they can search for colleges, uh, and there's financial aid information in that as well. So anyway, we will inform you about all of these things through our MIFA, MIFA email communication. And you can also connect with us on social media. We, we, here are all of our handles and we post all kinds of information, timely, up to date, to keep you educated and informed about college admissions, financial aid.

Um, loans, all of that. Um, in fact, we publish a lot about scholarship information on social media. And if your child is young, you know, a lot's going to happen between now and the time your child is set to go to college. So by being connected to MIFA, you just will know that you're going to continue to be educated on all of the things that you need to know about the college process.

You can also always call me for with short questions or long questions to talk things through or email us at college planning at mifa. org. So let me see. Are there any questions? here tonight on this program.

As I mentioned, it is a unique program for saving.

I don't see any questions. Oh, can you type your question into the Q& A? I see someone has a raised hand. Let's see.

Or if you raise your hand, I can take you off mute. Let's see. Okay, here we go. So, this person says, I have a U Fund 529 established in Massachusetts. Is this related to what you were talking about tonight, or two separate programs? I assume separate. And you are correct. So, we have two programs. We have the U Fund 529 plan, which I will say is also a terrific college savings program.

So, um, that's a great one. And we can, we can, uh, MIFA can help you with. Everything about that as well. Um, but this is a U Plan prepaid tuition program. And sometimes people choose one or the other, but many times people will choose both. There's no reason you couldn't have both. So this is a separate plan.

Oh, yeah. So someone's asking, Can you mention again how to see what I've saved and how it compares to schools? Yeah. So what will happen is you'll put money in and let's say you put it in many years in a row. Let's see. Let's say every year you put 1, 000 in. And so at some point you have you have 8, 000 in there or more.

Um, you'll receive quarterly statements of what You have saved in there and then it will show you that what you've locked in at the time you lock you lock in the money it what it's a percentage of the current tuition and fees at a certain college in each college. You know, it's it locks in a percentage at each college that year.

And then if you put money in the next year, it's locking in again a percentage of the current tuition at that year for all the different colleges. And then that keeps building. So at some point you're looking at I've saved all this money over these years, and each of those years it locked in a certain percentage.

So in this case, you can see the earlier you start the better because The lower tuition is tuition and fees. The higher percentage you're locking in. And so then at some point you can see that each college at one college, it might be worth 45 percent at another college. It might be worth 23 percent another college.

It might be worth 100 percent and you'll get that list every year. So, you know, I think the way. Parents use that sometimes is, um, they'll say to their kids. You know, let's look at this. Take a look at the when you're thinking about colleges. Let's take a look at some of these where we've already locked in a pretty high percent.

Um, you know, it doesn't have to be definitive. There are lots of choices, but it just helps you when you realize that you've saved a lot towards the tuition and fees. At some of these Massachusetts colleges and, uh, it can help between you and the student to be really maybe focusing a little, a little higher on those colleges.

And yeah, so it says, um, can I see a comparison in regards to the Massachusetts colleges and what I've saved so far? Yes. So really list out. I wish I could show you an actual form. I don't have it with me, but, um, you'll be able to see it will list all of the colleges. And the percent of the current tuition and fees that you've saved.

So, another good question is that, Do these tuition certificates earn any interest? And so, the answer is yes. They earn that CPI interest. Um, is the basic, so that if you take it out. You receive your money back with CPI interest. However, if you, if your child ends up going to one of the colleges on the list, you're earning something different than that, right?

You're earning that locked in percentage. An example I used to use that's a, it's a fictional example, but I think it's better than the one I used earlier. Let's say that today tuition and fees at UMass Amherst is 10, 000. Let's just say that. And you save five, you have 5, 000 that you put in the U plan.

Well, when you receive your list, the line that says UMass Amherst is going to say that you've locked in 50 percent of the tuition and fees at UMass Amherst. And so let's say in 13 years, when your student is going to college, the tuition and fees at UMass Amherst is 20, 000. Well, then your 5, 000 has become 10 because you've locked in 50%.

The tuition fees in the future are 20. Your five has become 10, 000. So that's, that's how it works by locking in the percentage of tuition. So that's different. Um, I don't want to say better or worse, but that's different. And that can be terrific. Um, and then if you don't use the money at one of the participating colleges, you can take the money back with CPI interest.

Oh, yeah. So this is a great question. So someone is trying to figure out what should I do? And they're trying to decide between the 529 plan or the prepaid tuition plan. Can I walk through the pros and cons? And yes, I would love to. But first, I'm going to say truly indeed. It doesn't need to be an either or.

You can have both. Um, but, but you can pick one as well. So let's see pros and cons. Um, let's start with the U plan because that's what we're talking about tonight. The U plan is really unique. And so if you really start saving in the U plan, when your child is young, And you're locking in those percentages all the way along and your child goes to one of the participating institutions that can really end up being a great deal.

We've had, uh, examples of families who were able to send, you know, 2 or 3 kids to Massachusetts colleges who participated in the plan and really. It made it very affordable. So, so that, that's terrific. And if you think there's a good chance that your student will attend one of those colleges, uh, and again, there are a lot of them, it can be, can be a really great way to, um, hopefully make that, that cost affordable.

But there are a lot of ifs, right? You're not sure if your student will attend one of those colleges. Again, it's just for tuition and fees. And so most of the time there are other expenses. So that's a con. So now I'm going to switch over and I'll just talk about the, the 5 29 plan, the U fund and why that's a little bit different.

Um, one that can be used at any accredited college in the whole country and even some international schools. So there's a wider That can be used more places. Um, and it could also be used for a wider range of expenses. So not just tuition and fees, uh, but housing, food, things like that. So that's a benefit.

That's very flexible with the 529 plan. Um, the, the 529 plan. Is usually invest. It's invested in, um, different portfolios, and you could choose a portfolio. Sometimes it could be in the stock market. Um, something that could be risky or conservative, you know, and and that could go up and down. Um, whereas back to the plan, the youth plan is invested in those general obligation bonds.

So yeah. Yeah, pros and cons to both and together. They can also work to, um, because, you know, especially when you have a young child, you know, you're not exactly sure of the plans of that child. Um, and so, so the two can work in tandem. As well. I hope that was helpful.

Oh, yes. So someone asked if we contribute over 100%, can the excess be withdrawn with the interest? Yes. Also, if my child doesn't go to college at all, does that also allow us to withdraw with the interest? Yes. So if, if you don't use the money in the U plan at one of these participating institutions, you can withdraw it with that CPI interest.

Well, those were really good questions.

Anything else? I guess while I have you here, I'll just say to all of you, I've been doing this work for a long time and, you know, saving for college. It's just a really good thing. Right now, we're working with all of these seniors in high school getting ready to go to college and all of those families and throughout all of these years, I've never had a family say to me, I wish I hadn't saved.

In fact, they all say, I wish I had started earlier. I wish I had saved more. So there's no bad plan. Um, so however you do it, however you choose to put some money away for college, it's great. Um, but yeah. It is nice to have the two plans here with MIFA, either the 529 or this very unique prepaid tuition plan and the EU plan.

And so now there's another question. I have a 529. Can I move the money from the 529 to the EU? I think so. The 5 29 is the U fund. So I think you mean to the U plan. So you can't though. Either way, you mean it. These two because the hour you plan is not a 5 29 plan, whereas you can move money from all different 5 29 plans without any penalty.

But the plan is its own unique plan. So Once you put the money in there, it's in there and you handle it the way we just talked about. And once you put the money in the 529, um, then it's in the 529. But again, having both is not a bad thing. So thank you.

Don't see any open questions, but I'm going to wait another few, few seconds because I'm, I've had so many good ones that. I know some of you might have another question. I think so. I, I, I'm a, I'm, I'm a proponent of keeping both or I, and I can only just tell you from my personal experience and that of others that I've spoken with, but I had both and both came in handy when I was paying for college for my two children.

Yeah. So another question about if the student goes to college outside of Massachusetts. Yeah. So if, if the student goes to a college that is not one of the participating institutions, then what you do is you just withdraw the money and you take, you get your money back with. CPI interest that has accrued over the years.

And then you can take that money and you can use that to pay college expenses at any other, any other institution or any, any other expenses.

You just don't get that big benefit of the locking in the percentage of tuition.

All right. Well, I hope this was helpful and let, let this be a start and please do reach out if you have more questions, if you want to talk things through, um, and check out our other webinars too. We have. Other Saving for College webinars where we talk about both plans, not in as much detail of the U plan as we did tonight, but we'll, we talk about the 529 plan as well, and we have all kinds of webinars about financial aid and the admissions process when you get to that stage as well.

So, thank you and have a lovely evening.